Even biggest doomsayers now think a Brexit recession is dead in the water

Johann Konig/FlickrWhen Britain voted to leave the European Union on June 23, economists almost universally predicted one thing — a technical recession would happen within a couple of years, as the UK adjusts to realities of leaving the EU.

One bank, Barclays, remained staunch in its belief that a recession was coming, arguing until the start of November that Britain would tumble into its first recession since the financial crisis in 2017 as the impact of Brexit takes hold.

The GDP beat pushed the bank's UK economists Fabrice Montagne and Andrzej Stepaniak to reconsider that position and reassess their forecasts to suggest that instead of suffering a recession — two consecutive quarters of negative growth — Britain's economy would shrink for just one quarter, and grow by 0.7% across the whole 0f 2017.

The pair have now bumped up their forecasts once again, writing last Friday that they expect the British economy to grow every quarter next year, and for growth to run at 1% over the full year.

"The main reason for this change is ongoing resilience in sentiment and data, as well as new risks that the withdrawal process could be delayed even further," they wrote.

In the note, titled "Drawn out slowdown replaces crash and bounce," Montagne and Stepaniak put much of the rebound in their forecasts down to the continuing uncertainty surrounding Brexit, meaning that businesses are delaying decisions about possibly moving operations away from the UK.

Here is the key extract (emphasis ours):

"Uncertainty about the timing of Brexit has likely prevented companies from acting upon the risks that an exit from the EU entails. According to results of a survey we conducted with Barclays' corporate clients, Brexit is not universally perceived as a major disruptive event.

"However, conflicting surveys have highlighted that there can be substantial differences in views on the impact of Brexit for businesses. We believe that the difficulty in properly assessing the ramifications of Brexit, as well as the length of the process, means that downside risks will only materialise gradually and lead to growth being lower for longer, rather than seeing GDP crash and rebound."